RREEF offers new details about its strategy to take over Virginia's ports

NORFOLK – One of two companies competing to take over management of Virginia's state-run ports laid out in more detail Tuesday its strategy to overcoming the fact that a key Hampton Roads terminal is privately owned.

Representatives for the company RREEF Infrastructure, an investing arm of Deutsche Bank, acknowledged at a Virginia Port Authority board meeting the hurdle presented to its bid by the fact that rival bidder, APM Terminals, owns a terminal in Portsmouth that handles a large portion of the containers handles at the local ports.

Currently the state-owned terminals in Newport News, Norfolk and Portsmouth are collectively by state-formed, non-profit Virginia International Terminals, which also owns APM's Portsmouth facility under a 20-year lease.

Not only does APM's bid envision that that company would be the sole terminal operator in the region, its lease agreement with VIT allows it to veto any other operating company from stepping into that role.

Andy Walters, an executive at J.P. Morgan Infrastructure Investments, which is RREEF's equity partner for the proposed deal, told commissioners that if chosen RREEF would try to get around the problem by buying APM's Portsmouth facility.

"We would purchase APM Terminals (Portsmouth) if they'd be so kind to sell it to us," he said.

Failing that, Walters said, the company would seek to speed up the development of Craney Island Marine Terminal, a tract in Portsmouth VPA wants to convert to a facility to help handle projected future growth in cargo traffic.

Asked later in the meeting how long it might take to develop Craney Island if money was not an issue, Jeff Florin, VPA's deputy executive director for operations, said "we could have Phase 1 of the terminal open in 12 years" – 10 years to develop the land and two years to build the terminal.

APM's North American president Eric Sisco stressed in a separate presentation to commissioners the advantages of a so-called "unified" port operating structure and the disadvantages of "Balkanized" terminal operations that might result from acceptance of RREEF's bid.

And in 2030, he noted, the VIT-APM lease is scheduled to expire, leaving Hampton Roads with competing terminal operators.

VIT president and CEO Joe Dorto said the company will be in good position to fight for shipping contracts even if APM turns into a competitor 18 years down the road.

That's because unlike APM or RREEF – which wants to partner with Maher Terminals to run the ports – VIT is a truly neutral party, and has no reason to pull punches because of business interests at other ports like the Port of New York/New Jersey, he argued.

Dorto noted that both Maher and APM have existing facilities in New York that send containers by rail to the Midwest. He argued that leaves the companies little incentive to aggresively compete for that business on behalf of Virginia, which also serves the midwest by rail.

As far as being able to handle future growth, Dorto said that in addition to being able to develop Craney Island, there's opportunity to bump up volume at existing facilities by rebuilding Portsmouth Marine Terminal and redeveloping Norfolk International Terminals.

In other business, commissioners voted on a severance agreement for former executive director Jerry Bridges without commenting on the terms. Board chairman Mike Quillen has said in the past that he considers that information to be confidential.

The board also formalized the decision, made in September, to make Rodney Oliver, the chief financial officer, interim executive director.